US Investors Buck Domestic Bias

July 2, 2001 ( - Americans now have $1.8 trillion invested in foreign stock, compared to $198 billion a decade ago.

And, on average, they own over 20% of the total shares of the 100 largest traded foreign companies in the US, new research reveals.

The research, sponsored by Citibank Depositary Receipt Services and the Organization for International Investment, examined the link between non-US companies with US operations, and US stock ownership of these companies, which it calls the Reciprocal 100.

American “Buy”

The report found that as foreign direct investment in the US increases, as it did by $321 billion last year, so too does US ownership of the Reciprocal 100, due to:

  • the popularity of American Depositary Receipt (ADR) programs,
  • a growing investor class – stock ownership has risen from 20% in 1990 to 50% in 2000,
  • the globalization of US capital markets, and
  • the diversification of mutual and pension funds.

The report indicates that US investment in ADRs has grown at a 36% annual rate, from an estimated $31 billion a decade ago to $678 billion last year. At the same time ADRs represent a growing percentage of US investments, more than doubling from an estimated 15% in 1990 to 38% in 2000, according to the report.

World Brands

Data from 1999, the most recent available shows that US subsidiaries of international companies:

  • employed 5.6 million US workers,
  • accounted for one in seven manufacturing jobs,
  • spent $25 billion on US research and development, and
  • produced exports that accounted for 20% of US total exports.

Contrary to the “domestic bias” argument, which describes the propensity of investors to buy stocks of companies based only in their home country, US investors are increasingly recognizing that many of the foreign brands they rely on are manufactured in the US, such as Nokia and Toyota.

They are also starting to include these in their stock portfolios. And those that have, have been reaping the rewards. For the five-year period ending February 28, 2001, Nokia and Toyota have produced a total return of more than 400%.


And, what’s more, the study found that over a five-year time horizon:

  • The Reciprocal 100 companies’ shares showed aggregate returns of 143.21%,
  • while the MSCI WORLD (ex-USA) index returned only 33.97%, and
  • the S&P 500 rose by 114.36%.

US Fingers in Foreign Pies

The study was based on The Reciprocal 100, a list of the 100 largest publicly -traded foreign companies in the US based on volume of US sales, two thirds of which have ADRs, which are certificates issued by US banks representing ownership in foreign companies.

ADRs are popular with US investors because they pay dividends in dollars and are traded in the same way that domestic shares are. And their popularity is growing, US investment in ADRs grew from $31 billion in 1990 to $678 billion in 2000.

Market capitalization representing US stock ownership for Reciprocal 100 firms was $864 billion. Of these foreign firms:

  • a little over 62% had US ownership of at least 10% of shares,
  • over a third have US ownership of at least 20% of shares,
  • 22% have at least 30% US ownership, and
  • only 14% had US ownership of less than 5% of shares.

The report, including a list of the Reciprocal 100, is at .